Problem 23-1A Analysis of income effects of additional business LO A1

Jones Products manufactures and sells to wholesalers approximately 300,000 packages per year of underwater markers at $3.97 per package. Annual costs for the production and sale of this quantity are shown in the table.

Direct materials	$	384,000
Direct labor		96,000
Overhead		288,000
Selling expenses		120,000
Administrative expenses		80,000
Total costs and expenses	$	968,000

A new wholesaler has offered to buy 50,000 packages for $3.35 each. These markers would be marketed under the wholesalers name and would not affect Jones Products sales through its normal channels. A study of the costs of this additional business reveals the following:

	Direct materials costs are 100% variable.
	Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at 1 times the usual labor rate.
	35% of the normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 65% of the annual overhead cost is variable with volume.
	Accepting the new business would involve no additional selling expenses.
	Accepting the new business would increase administrative expenses by a $4,000 fixed amount.

Required:

Complete the three-column comparative income statement that shows the following (Round your intermediate calculations and per unit cost answers to 3 decimals)

1.	Annual operating income without the special order.
2.	Annual operating income received from the new business only.
3.	Combined annual operating income from normal business and the new business.

Problem 23-3A Make or buy LO P1, A1

Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 63,000 units of RX5 follows.

Direct materials	$	4.00
Direct labor		8.00
Overhead		9.00
Total costs per unit	$	21.00

Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 63,000 units of RX5 for $19.00 per unit.

Required:

1.	Calculate the incremental costs of making and buying component RX5.

1. value: 2.00 points Problem 23-1A Analysis of income effects of additional business LO A1 Jones Products manufactures and sells to wholesalers approximately 300,000 packages per year of underwater markers at $3.97 per package. Annual costs for the production and sale of this quantity are shown in the table. Direct materials Direct labor Overhead Selling expenses Administrative expenses $ 384,000 96,000 288,000 120,000 80,000 Total costs and expenses $ 968,000 A new wholesaler has offered to buy 50,000 packages for $3.35 each. These markers would be marketed under the wholesaler's name and would not affect Jones Products' sales through its normal channels. A study of the costs of this additional business reveals the following: Direct materials costs are 100% variable. Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at 1/2 times the usual labor rate. . 35% of the normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 65% of the annual overhead cost is variable with volume. Accepting the new business would involve no additional selling expenses. Accepting the new business would increase administrative expenses by a $4,000 fixed amount. Required: Complete the three-column comparative income statement that shows the following (Round your intermediate calculations and per unit cost answers to 3 decimals) 1. Annual operating income without the special order. 2. Annual operating income received from the new business only. 3. Combined annual operating income from normal business and the new business. Total Per Unit Amounts Normal New Business Volume Normal Volume New Business Combined Sales Variable costs: 0.000 0.000 0 0 0 Total variable costs Contribution margin 0 0 0 0 Fixed costs: Fixed overhead Selling expenses Administrative expenses 0 0 0 0 0 0 Total fixed costs Operating income $ 0 2. value: 2.00 points Problem 23-3A Make or buy LO P1, A1 Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 63,000 units of RX5 follows. Direct materials Direct labor Overhead $ 4.00 8.00 9.00 Total costs per unit $ 21.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 63,000 units of RX5 for $19.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Total incremental costs of: Making the units Buying the units Total costs Should the company continue to manufacture the part, or should it buy the part from the outside supplier